Pax4 is a paired-domain-containing transcription factor that plays a crucial role in the development of pancreatic β- and δ-cells. In the absence of Pax4, no β- or δ-cells develop, but an increase in the number of α-cells is observed. To gain insight into Pax4 function, a rat insulinoma cDNA library was screened and two Pax4-related clones were isolated. One clone encoded a 349 amino acid protein with a molecular weight of 38K that corresponded to the full-length sequence of Pax4. The second cDNA, termed Pax4c, was identical to Pax4 but lacked the sequences encoding 117 amino acids at the COOH-terminus. Intracellular localisation studies indicated that Pax4 was sequestered specifically in the cytoplasm of β-cells. To determine the effect of Pax4 on islet cell gene expression, Pax4 was co-transfected with a series of human insulin and islet amyloid polypeptide (IAPP) promoter constructs into the β-cell line MIN6, and transcriptional activity was measured by reporter gene assay. Pax4 was found to have an inhibitory effect on the human insulin gene promoter, which was mapped, to the region -229 to -258. Electrophoretic mobility shift assay was used to show that Pax4 could bind to the C2 element located at -253 to -244 within this region. Pax4 was also found to have an inhibitory effect on the IAPP promoter, which was mapped to a sequence downstream of -138. Using a GAL4 reporter system, the repressive properties of Pax4 was further mapped to separate regions of the promoter between amino acids 2-230 and 231-349.